Opinion
NO. 01-16-00733-CV
07-06-2017
CARNEGIE HOMES & CONSTRUCTION, LLC, Appellant v. FUNDA SAHIN, Appellee
On Appeal from the 133rd District Court Harris County, Texas
Trial Court Case No. 2014-04952-A
MEMORANDUM OPINION
This is an appeal from the trial court's summary judgment enforcing a settlement agreement. On appeal, Carnegie Homes and Construction, LLC contends that the trial court erred in granting summary judgment to Funda Sahin, who moved to enforce the settlement, because (1) the settlement agreement is unenforceable as a matter of law, (2) Sahin failed to show that she was entitled to specific performance, and (3) evidence that Sahin had "unclean hands" disqualified her from receiving equitable relief. We affirm.
BACKGROUND
Funda Sahin bought a home from Carnegie Homes. Soon thereafter, Sahin complained about various construction defects, and Sahin became dissatisfied with Carnegie Homes's apparent unwillingness to make repairs. She sued Carnegie Homes and its officers for breach of contract, common-law and statutory fraud, and violations of the Texas Deceptive Trade Practices Act. Sahin claimed that Carnegie Homes failed to disclose multiple defects in the Property, including toxic mold, leaks, doors that did not lock, and a bedroom ceiling that was caving in.
Sahin named Ram Gupta and Arpan Gupta, Carnegie Homes's officers, as defendants, and they are parties to the settlement agreement. They also are identified as appellants in the notice of appeal. In its brief, Carnegie Homes explains that the Guptas have procured a release of claims from Sahin and, accordingly, they are not pursuing their appeals.
The parties mediated their dispute and reached a settlement, in which Carnegie Homes agreed to buy back the Property from Sahin. The parties first documented the settlement as a Rule 11 agreement. Later, they prepared and executed a more formally drawn, final agreement. When the deadline for closing on the Property passed without any action from Carnegie Homes, Sahin amended her pleadings and sought specific performance of the terms of the final settlement agreement. She moved for summary judgment on these claims, and the trial court granted her motion.
The Rule 11 agreement obliges Carnegie Homes to:
• purchase the Property from Sahin for $637,500.00, which it will pay at the closing of the Property;The Rule 11 agreement further provides that:
• hold the closing related to the sale of the Property between August 19, 2015 and September 1, 2015;
• pay all closing costs except for prorated property taxes; and
• if the closing is delayed beyond September 1, 2015, make all mortgage and escrow payments (taxes and insurance) related to the Property from September 2, 2014 through the date of closing.
• in exchange for Carnegie Homes's payment of $637,500.00, Sabine will sign a mutual release of claims, dismiss all claims against Carnegie Homes and the Guptas with prejudice, and assign any third-party claims she may have to Carnegie Homes;
• each party will bear its own attorney's fees and court costs;
• the settlement documents will be completed within 30 days of the parties' acceptance of the mediator's proposal;
• the parties will attempt to resolve any dispute with regard to the interpretation or performance of the agreement with the mediator; and,
• if litigation is brought to construe or enforce the agreement, the prevailing party shall be entitled to recover attorney's fees as well as costs and expenses, including the cost of mediation.
Carnegie Homes's counsel next drafted a Full and Final Settlement and Release Agreement based on the terms set forth in the Rule 11 agreement. Both parties signed the final settlement agreement.
After Carnegie Homes refused to pay for the Property or make the mortgage and escrow payments, the parties attempted mediation again but were unsuccessful. Sahin tried to schedule yet another mediation, but Carnegie Homes failed to inform Sahin when it would be available to mediate. Sahin moved to enforce the agreement. The trial court granted the motion.
DISCUSSION
I. Summary Judgment Challenge
Carnegie Homes challenges the propriety of the summary judgment, arguing that the final settlement agreement is not enforceable, and alternatively, that specific performance is not an appropriate remedy.
A. Standard of review
We review de novo the trial court's ruling on a motion for summary judgment. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). Under the traditional standard for summary judgment, the movant has the burden to show that no genuine issue of material fact exists and that the trial court should grant a judgment as a matter of law. TEX. R. CIV. P. 166a(c); KPMG Peat Marwick v. Harrison Cty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). When reviewing a summary judgment, we take as true all evidence favorable to the nonmovant and indulge every reasonable inference and resolve any doubts in the nonmovant's favor. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Provident Life & Accid. Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003).
The motion must state the specific grounds relied upon for summary judgment. TEX. R. CIV. P. 166a(c). If a trial court grants summary judgment without specifying the grounds for granting the motion, we must uphold the trial court's judgment if any one of the grounds is meritorious. Espinosa v. Aaron's Rents, Inc., 484 S.W.3d 533, 540 (Tex. App.—Houston [1st Dist.] 2016, no pet.) (citing Beverick v. Koch Power, Inc., 186 S.W.3d 145, 148 (Tex. App.—Houston [1st Dist.] 2005, pet. denied)).
B. Carnegie Homes's failure to comply with its obligations under the settlement agreement does not bar enforcement.
Carnegie Homes first contends that the final settlement agreement is unenforceable because it has not yet performed all of the terms set forth in Section E of the settlement agreement, which it characterizes as "conditions precedent." Whether a contractual provision creates a condition precedent to performance is a question of law we review de novo. Walden v. Affiliated Servs., Inc., 97 S.W.3d 302, 326 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). "A condition precedent may be either a condition to the formation of a contract or to an obligation to perform an existing agreement." Hohenberg Bros. Co. v. George E. Gibbons & Co., 537 S.W.2d 1, 3 (Tex. 1976), quoted in Amir v. Int'l Bank of Commerce, 419 S.W.3d 687, 691 (Tex. App.—Houston [1st Dist.] 2013, no pet.). While a failure to satisfy a condition precedent generally results in no enforcement of the contract, the failure to perform a contractual obligation may create liability. McMahan v. Greenwood, 108 S.W.3d 467, 484 (Tex. App.—Houston [14th Dist.] 2003, pet. denied).
Conditions precedent to an obligation to perform are acts or events that occur after the execution of a contract and that must occur either before there is a right to immediate performance or before there is a breach of a contractual duty. Hohenberg Bros., 537 S.W.2d at 3; Amir, 419 S.W.3d at 692; see also McMahan, 108 S.W.3d at 484 (explaining that "a condition precedent is something that must exist before a duty of immediate performance of a promise arises") (citing Ins. Corp. of Am. v. Webster, 906 S.W.2d 77, 81 (Tex. App.—Houston [1st Dist.] 1995, writ. denied)). No particular words are required to create a condition precedent, but terms such as "if," "provided that," "on condition that," or some other phrase that conditions performance, "usually connote an intent for a condition rather than a promise." Hohenberg Bros., 537 S.W.2d at 3.
In determining whether a condition precedent exists, courts look at the parties' intent as expressed in the plain words of the contract, viewed as a whole. Criswell v. European Crossroads Shopping Ctr., Ltd., 792 S.W.2d 945, 948 (Tex. 1990). "In order to make performance specifically conditional, a term such as 'if', 'provided that', 'on condition that', or some similar phrase of conditional language must normally be included." Id. While these specific conditional phrases are not absolutely required, "their absence is probative of the parties' intention that a promise be made, rather than a condition imposed." Id. (citing Hohenberg Bros., 537 S.W.2d at 3). "Because of their harshness and operation, conditions precedent are disfavored." Gulf Liquids New River Project, LLC v. Gulsby Eng'g, Inc., 356 S.W.3d 54, 64 (Tex. App.—Houston [1st Dist.] 2011, no pet.). If no conditional language is used, contract terms will be construed as covenants to prevent forfeiture of contractual rights. Criswell, 792 S.W.2d at 948.
Carnegie Homes contends that Section E of the final settlement agreement is conditional as to all of its provisions. Section E provides that:
1. In exchange for release of all claims against Carnegie Homes Homes & Construction, LLC, Ram Gupta and Arpan Gupta, contained herein, held by Funda Sahin arising out of the Property located at 1238 West Pierce Houston, Texas 77019 and being generally legally described as Lot 1, Block 1, West Pierce Street Court Subdivision, Houston, Harris County, Texas (the "Property"), which forms the basis of the litigation, and sale of the Property to [Carnegie Homes] or its assignee, [Carnegie Homes] will pay SIX HUNDRED THIRTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS ($637,500.00) at the closing of the Property at a title company to be designated by [Carnegie Homes]. [Carnegie Homes] will pay all closing costs except for the prorated property taxes which will remain the responsibility of [Sahin].
2. Possession of the [P]roperty shall be delivered to [Carnegie Homes and the Guptas] upon receipt of the closing funds by [Sahin].
3. The closing related to the sale of the Property shall take place between August 19, 2015 and September 1, 2015. If closing is
delayed beyond September 1, 2015, [Carnegie Homes and the Guptas] shall be responsible for the existing Property mortgage and escrow payments (taxes and insurance) related to the Property from September 2, 2015 through the date of closing.
4. The items described in the attached Exhibit "A" shall be excluded from the conveyance of the Property by [Sahin] under this agreement and shall remain the property of [Sahin].
5. The Property is to be conveyed in an "as is" condition with no representations or warranty of any type or kind from [Sahin]. However, all warranties for all work performed by any contractor since the date of purchase by [Sahin] shall be transferred to [Carnegie Homes and the Guptas].
6. [Sahin] and [Carnegie Homes and the Guptas] agree to execute such other documents as the Title Company and/or lender of [Carnegie Homes] deems necessary for the transfer and closing of the sale of the Property from [Sahin] to [Carnegie Homes].
7. [Sahin] shall provide to [Carnegie Homes and the Guptas] a list of all trades that worked on the Property since April 20, 2012, to the extent that are not already disclosed in the documents provided to [Carnegie Homes and the Guptas] together with all warranty documents and contracts that they provided. [Sahin] will also provide a property disclosure, to the best of [Sahin]'s knowledge, listing all remaining problems with the Property.
8. Upon the closing and funding of the purchase of the Property the counsel for the parties hereto will sign and enter a Joint Motion for Dismissal With Prejudice and Agreed Order of Dismissal With Prejudice regarding all claims advanced in the Lawsuit against [Carnegie Homes and the Guptas] by [Sahin], copies of which Motion and Agreed Order are attached hereto and incorporated herein for all purposes as Exhibits.
9. Upon the funding, closing and receipt of funds by [Sahin] from the sale of the Property, [Sahin] will assign any clams that she may have against the remaining third party [Carnegie Homes and the Guptas] and against any person or entity who performed work on
the Property during the period of ownership by [Sahin] to [Carnegie Homes].Item 12 did not appear in the parties' Rule 11 agreement. Section E otherwise incorporates Carnegie Homes's obligations under the Rule 11 agreement that it supersedes.
10. Each party agrees to be solely responsible for the payment of their respective attorney's fees, court costs, expert witness fees, court reporter's fees, and all other expenses incurred on said party's behalf as a result of or in connection with the Lawsuit and/or this Settlement Agreement.
11. If one or more disputes arise with regard to the interpretation and/or performance of the Settlement Agreement or any of its provisions, the parties agree to attempt to resolve same with Brian Tagtmeier, "the mediator" who facilitated this agreement, if the parties cannot resolve their differences by telephone conference, then the parties agree to schedule a mediation with him as soon as possible to resolve the disputes. If litigation is brought to construe or enforce any Settlement Agreement, the prevailing party shall be entitled to recover attorney's fees as well as costs and expenses, including the cost of the mediation.
12. This settlement agreement and release shall only be effective upon performance of the conditions set forth in Section E of this agreement.
Carnegie Homes contends that item 12, declaring that the "settlement agreement and release shall only be effective upon performance of the conditions set forth in Section E," renders the remaining provisions of the agreement conditional and unenforceable. It argues that item 12 converts the remaining covenants preceding it into conditions precedent.
Item 12 does not convert the covenants in Section E into conditions. Although item 12 refers to "conditions set forth in Section E," the other itemized obligations in Section E do not condition performance. The mandatory language of those covenants, as first memorialized in the parties' Rule 11 agreement, remains. Those covenants provide that Carnegie Homes "will pay" for the Property and costs at a closing, which "shall take place" by September 1, 2015. If delayed, Carnegie Homes "shall be responsible" for mortgage and escrow payments from September 2, 2015 until the date of closing. In connection with the property transfer, Sahin "shall" transfer any warranties for work performed on the Property and provide a list of problems remaining on the Property. This language expresses the intention that the parties' respective obligations under the final settlement agreement be mutual promises. See Daneshjou v. Kasling, Hemphill, Dolezal, and Atwell, L.L.P., No. 03-16-00664-CV, 2017 WL 744256, at *2 (Tex. App.—Austin Feb. 23, 2017, no pet.) (mem. op.).
The heading for Section E also supports the conclusion that it contains the core obligations of the parties' settlement. Section E is not entitled "Conditions Precedent." Rather, it is entitled "Consideration and Settlement Terms." Item 12 does not render that title meaningless by referencing "conditions" that do not otherwise exist. Accordingly, we hold that the trial court did not err in granting Sahin's motion to enforce the settlement agreement.
The structure of the settlement agreement as a whole is consistent with this interpretation. The sections of the settlement agreement preceding Section E include "Definitions" (A); "Contractual Recitals and Statement of Purpose" (B); "Persons and Entities Bound by This Settlement Agreement" (C); and "No Outstanding Claims" (D). Following Section E are "Mutual Release" (G), "Inurement" (G); "Express Denial of Liabilities" (H); Severability (I);"Entire Agreement of Parties" (J); "Confidentiality" (K); "Governing Law" (L); "Full Understanding and Agreement" (M); and "Execution and Effective Date" (N).
Carnegie Homes also argues that Sahin failed to attempt to resolve this dispute through mediation before filing the lawsuit, as Section E, item 11 of the settlement agreement requires. The record demonstrates, however, that Sahin complied with that requirement. Thus, item 11 provides no obstacle to enforcement of the settlement agreement.
C. Specific performance is an appropriate remedy.
Carnegie Homes next claims that the trial court erred in requiring specific performance. In her motion for summary judgment, Sahin requested specific performance because she "has no adequate remedy at law because the Rule 11 Settlement Agreements are contracts for the sale of property, which is unique."
The uniqueness of real property makes a claim for specific performance of a contract for its sale intrinsically suited to the remedy of specific performance. See Pickard v. LJH Enters., Inc., No. 01-07-01105-CV, 2010 WL 1493105, at *3 (Tex. App.—Houston [1st Dist.] Apr. 15, 2010, no pet.) (mem. op.). As a result, the plaintiff seeking specific performance need not make any additional showing of an inadequate remedy at law. See Kress v. Soules, 261 S.W.2d 703, 704 (Tex. 1953); Pickard, 2010 WL 1493105 at *3.
Carnegie Homes asserts that specific performance is not appropriate here because specific performance is available to remedy breach by a seller, but not by a buyer. See DiGiuseppe v. Lawler, 269 S.W.3d 588, 594 (Tex. 2008); Kress, 261 S.W.2d at 704; Pickard, 2010 WL 1493105 at *3; Scott v. Sebree, 986 S.W.2d 364, 369-70 (Tex. App.—Austin 1999, pet. denied). These cases, however, do not limit the availability of specific performance to the buyer; they uniformly confirm that specific performance can provide equitable relief from a defendant's refusal to perform or its repudiation of a contract where monetary relief will not adequately compensate the injured party. DiGiuseppe, 269 S.W.3d at 594; Pickard, 2010 WL 1493105 at *3.
In the context of an agreement to settle a lawsuit involving the sale of property that involves repurchase of an interest, specific performance is a remedy that is available to a seller. See Singh v. Skibicki, No. 01-14-00325-CV, 2015 WL 7785566, at * (Tex. App.—Houston [1st Dist.] Dec. 3. 2015, no pet.) (mem. op.) (plaintiff entitled to specific performance where defendants agreed to settle dispute by buying plaintiff's ownership interest in company engaged in commercial real estate development but failed to fulfill purchase obligation). We hold that the recitation in Sahin's motion is adequate to establish her right to seek specific performance.
The summary judgment evidence demonstrated that Sahin complied with the settlement agreement and has at all times been ready, willing, and able to perform her duties with respect to the final settlement agreement, and that Carnegie Homes failed to comply with its contractual obligations. As a result, the trial court did not abuse its discretion in requiring specific performance of the settlement agreement.
II. The trial court acted within its discretion in rejecting Carnegie Homes's "unclean hands" defense.
Carnegie Homes also argues that Sahin did not show her entitlement to relief because she acted with "unclean hands" with respect to the final settlement agreement. The defense of unclean hands derives from the equitable principle that the party seeking equity must come into court with clean hands. Truly v. Austin, 744 S.W.3d 934, 938 (Tex. 1988); In re EGL Eagle Global Logistics, L.P., 89 S.W.3d 761, 766 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding). A party whose conduct is unconscionable, unjust, or marked by want of good faith is not entitled to equity, but the court should not apply the clean hands doctrine unless the party asserting it has been seriously injured and the wrong complained of cannot be corrected without the application of the doctrine. RDG Ltd. P'ship v. Gexa Corp., No. 14-04-00679-CV, 2005 WL 949171, at *4 (Tex. App.—Houston [14th Dist.] Apr. 26, 2005, no pet.) (first citing City of Fredericksburg v. Bopp, 126 S.W.3d 218, 221 (Tex. App.—San Antonio 2003, no pet.); and then citing Flores v. Flores, 116 S.W.3d 870, 876 (Tex. App.—Corpus Christi 2003, no pet.)). Because it is an equitable defense, the trial court has the discretion to determine whether a party has come to the court with unclean hands, and we will reverse its determination only if it abuses that discretion. See Park v. Escalera Ranch Owners' Ass'n, Inc., 457 S.W.3d 571, 598 (Tex. App.—Austin 2015, no pet.); Grohn v. Marquardt, 657 S.W.2d 851, 855 (Tex. App.—San Antonio 1983, writ ref'd n.r.e.).
According to Carnegie Homes, Sahin served but never filed a supplemental petition that alleged that Carnegie Homes committed additional fraudulent acts. Carnegie Homes was required to submit this supplemental petition in connection with its loan application. That disclosure, Carnegie Homes alleges, caused the prospective lender to refuse Carnegie Homes the financing it needed to perform its duties under the settlement agreement.
This claim is akin to one for compelled self-defamation, which the Texas Supreme Court recently refused to recognize in Exxon Mobil Corporation v. Rincones. No. 15-0240, 2017 WL 2324710, at *4 (Tex. May 26, 2016). Because the parties' briefing does not address the nature of Carnegie Home's claim, we decide this issue on different grounds.
Prevention of performance by one party may excuse the performance of contractual duties by the other party. Dorsett v. Cross, 106 S.W.3d 213, 217 (Tex. App.—Houston [1st Dist.] 2003, pet. denied). The disclosure of the supplemental petition to one prospective lender, however, did not prevent Carnegie Homes from performing its contractual duties. The settlement agreement is silent on the issue of financing. It does not require Sahin to assist Carnegie Homes in obtaining financing, nor does it condition Carnegie Homes's obligation to buy Sahin's property on its ability to obtain financing. We therefore hold that the trial court acted within its discretion in rejecting Carnegie Homes's unclean hands defense.
CONCLUSION
We hold that the trial court did not err in granting Sahin's motion for summary judgment. We therefore affirm the judgment of the trial court.
Jane Bland
Justice Panel consists of Justices Higley, Bland, and Brown.